AFR Statement on Leaked Details of Volcker Rule

DATE: September 19, 2011

CONTACT: John Carey at 202-466-1854          


AFR Statement on Leaked Details of Volcker Rule

Washington, DC
– Americans for Financial Reform, a coalition of more than 250 national and state organizations working together for strong Wall Street reform, issued the following statement today:

The Financial Times reported today that recent drafts of the Volcker Rule indicate regulators are considering the addition of substantial new exemptions to the statutory ban on proprietary trading and conflicts of interest. These include blanket exemptions for commodity trading, spot currency trading, “repo” trading, securities lending, broad exemptions for liquidity management, and a broader exemption for securitizations than is contemplated in the legislation.

The Volcker Rule is a crucial part of the Dodd-Frank Act. It is perhaps the clearest attempt to change the culture of our major banks to focus on the needs of their customers, rather than short-term returns driven by irresponsible risk-taking and highlighted by conflicts of interest.  This is precisely the kind of “casino” culture that has once again left a major global bank (UBS) with large and unexpected losses. The Volcker Rule statute already contains tailored exemptions for standard capital market activities such as hedging and market making. These exemptions may in and of themselves be challenging for regulators to police.

Any full evaluation of the rule must wait until the entire proposed rule is made public, and depends on the exact ways in which proprietary trading is demarcated from other permitted activities. However, AFR is very concerned that if regulators add still more exemptions to the rule they may undermine the foundations of the statute and continue to allow major banks to take irresponsible risks.”